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A New Chinese Digital Currency?

In a recent report made by The People’s Bank of China (PBOC), China’s Central Bank, on January 10, 2020, it was stated that the basic design of the Chinese Digital Currency Electronic Payment (DCEP) has been completed and that the bank is preparing for pilot projects in the near future.

The PBOC began working on the digital currency back in 2014 and has used the past few years research the technologies involved and the possible impact on the economic and financial systems. After more than five years of work it is now expected to be launched sometime in 2020, although no clear date has been given.

The currency’s aim is to provide a digital alternative to cash notes, thereby reducing cash circulation and provide the government with better tools to combat illegal activities that are often associated with the movement of large amounts of cash notes.

While the DCEP was being developed, however, the use of Alipay and Wechatpay, other forms of digital payment has been well entrenched in Chinese society. Today, virtually all retail stores, large or small, accept payment by Alipay and Wechatpay. This brings up the question of the need for such a currency, how it would be implemented, and what additional benefit it would bring to users, and how it would impact current payment providers in the market. Some answers to those questions may lie in the fact that the new digital currency will support a a “dual offline payment”, which makes a transaction possible even without internet, signal, or any communication network.

It is still unclear when the upcoming pilot projects will be launched and how long they will last, let alone if and when the currency will be actually launched.

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